Appendix 17b: Bioresources technical

appendix

1. Bioresource Technical Appendix

1.1. Introduction

The appendix has been created as an appendix to the Bio resource business plan narrative

document. It provides a greater level of detail around 2 aspects of the plan;

• Treatment Service

• Market Testing Engagement

1.2. Treatment Service

1.2.1. Summary

The Treatment Service is an internal measure we will use with Waste Water Networks Plus

(WWN+) to ensure that 100% of sewage sludge is transported, treated and disposed of in

the most efficient way possible. The means of treatment could be either internal or external

capacity. The Treatment Service will be measured using internal service level agreements

between the WWN+ price control and the Bioresource price control.

Our target is to achieve 100% treatment service. This represents a significant improvement

from the current period, where we have faced reliability, flooding and safety challenges.

1.2.2. Track Record

AMP6 has seen down time on YW bioresources assets that have reduced treatment

capacity. Our resilience plans for AMP7 seek to guarantee that capacity with either YW or

third-party assets.

Our AMP7 plans are shaped by the lessons we have learnt from AMP6. Our track record in

providing a treatment services to WWN+ has been largely successful – the instances where

failure to provide a bioresources service have impacted on the sewage services that the

business offers to customers are rare. The challenges that Yorkshire Water have faced in

AMP6 are the lack of resilience in our assets and processes and the cost that has been

incurred because of this shortfall.

In December 2015 Yorkshire experienced significant rainfall deemed a 1:150 return period

in several catchments across the region and the subsequent flooding affected the whole

business significantly. The event reduced the sludge treatment capacity to less than half of

the demand of the company’s sewage treatment works.

The response to this was immediate in bioresources and significant mitigation activity was

implemented to continue to provide this service. Temporary centrifuges were employed to

remove sludge from waste water treatment works connected to now out of service sludge

treatment centres; additional transport services were employed to move increased sludge

around the region; and third-party treatment services were procured with providers in the

market to allow sludge to continue to be treated.

The period of downtime from this significant event as well as other unplanned outages in our

ageing asset base was significant as can be seen in the graph (see Figure 1), where only

slowly have we received the deficit in treatment capacity to match production through the

AMP7 period.

Figure 1: AMP 6 YW Treatment Capacity vs Production

By 2020 we will cease sewage sludge incineration, sludge conditioning and lime stabilisation

as primary treatment routes. Our focus will be in on anaerobic digestion, both mesophilic

and advanced. These treatment technologies are more efficient and provide additional

benefit in a more recyclable product and renewable generation from biogas generation.

The digestion strategy will be complete when Yorkshire Water have finished investment at

our Huddersfield and Knostrop (Leeds) sites in 2020 and 2019 respectively.

The transformation of our bioresources activity from just part of the wastewater treatment

process to its own functionally separate service comes at a key strategic point for Yorkshire

Water as we will have recently completed the delivery of all our digestion capacity. The

delivery frameworks that have created this capacity need a new focus as our AMP7 capacity

concentrates on asset renewal and refurbishment.

The cost of mitigation and our delivery methods of creating robust capacity show Yorkshire

Water as a relatively inefficient bioresources business when compared to other water

companies. In 2016/17 Yorkshire Water was the least efficient bioresources company when

compared to the 9-other water and sewage companies (WASCs) in England and Wales,

shown in the following graph (see Figure 2).

Figure 2: WASC yr on yr Bioresources TOTEX Comparison (£/tds)

1.2.3. Options, Innovation and Resilience

The following diagram (see Figure 3) shows our interpretation of the waste water asset

base using regulatory guidance and where the Bioresource boundary is including the key

asset types within the control. This form the basis of our business planning.

Figure 3: WwTW & STC Network

Our investment and expenditure plan for Bioresources looks at the entire system to ensure

that we provide 100% Treatment Service. The plan contains investment in areas not directly

related to treatment capacity, but which will enable capacity. For example, through

improving the performance and reliability of some of our connecting assets like sludge

thickening.

1.2.4. Our Investment Plan

The following table shows (see Figure 4) the main components of our plan.

Performance Commitment Activity Category Sub-category

Treatment Service

Transport Bioresources Transport

Bioresources Transport

Managing sludge for Yorkshire's waste water treatment works

Treatment Capacity New Capacity

Maintaining Capacity

Other

Dewatering & Thickening

New Capacity

Maintaining Assets

Other

Regulatory Compliance

Regulatory Compliance

Disposal Biosolids recycling

Recycling Operations

Recycling infrastructure

Innovation

Resilience

Figure 4: Yorkshire Water Investment Plan

1.2.5. Bioresources Transport

Our Bioresources transport service is key to providing an excellent service to customers.

Collectig sludge in a timely and effective manner from wastewater treatment works ensures

environmental compliance, ensures our overall resilience and keeps processes optimised.

The flexibility and adaptability of an intelligent, modelled transport service ensures that we

can utilise capacity across our region when we lose capacity to planned and reactive

shortfalls.

1.3. Treatment Capacity

Our bioresources treatment service is at the core of our bioresources operation. By

providing (see Figure 5) resilient and efficient capacity we drive the overall performance of

bioresources at Yorkshire Water. We will need to create new capacity for Yorkshire Water

sewage sludge in AMP7 as a result of growth in production. Our approach ensures that we

don’t provide too much or too little capacity and always seeks market prices for provision of

that capacity to ensure it’s efficient. In Bio 1, we articulate that a small proportion will

efficiently be treated by a 3rd party, but the table below (figure 5) shows that capacity will be

greater than production. It should be noted that we will have headroom for unplanned

outage and this is why there is ‘spare capacity’.

Figure 5: AMP7 & 2025 Production & Capacity

Our investment plan for the bioresources service is built on creating resilient and efficient

capacity (either on YW assets or with third-parties). We have followed a robust process.

Our approach seeks to meet four key tests (see Figure 6):

1. Does the programme meet our 2025 capacity requirement?

2. Does the programme ensure no shortfalls in sludge treatment capacity on a monthly

basis, over the whole AMP?

2020-21 2021-22 2022-23 2023-24 2024-25 2025-26

Production 152,739 153,648 154,972 160,254 176,449 177,358

Capacity 161,519 161,409 162,772 179,264 179,264 179,264

Initiative: Tankering outsource – The activity of liquid tankering will be tendered to recognise

value savings on the overall delivery cost of a Bioresources service.

Currently cake transport and some aspects of reactive liquid tankering are outsourced activities

and we will start a full procurement process for the full transport service.

Assessing the best price from the market for this service ensures our customers do not pay more

than they should for this area of the bill. Transport is an area where we think the market has

value to offer based on similar activities in other industries. We will be going to market with a

logistics contract opportunity for both our cake and liquid requirements.

3. Is the programme resilient (no sludge shortfalls) to unplanned events with a

confidence of at least 95%?

4. Is the programme the most efficient of the scenarios that meet the above three

tests?

Meet 2025 Capacity

Requirementû

No shortfalls over AMP7 û

Resilient to 95% of events û

Efficient capacity

ü

£0m

Figure 6: 4-step test

This process shown below (see Figure 7), looks at the sludge production and capacity of

the future; identifies a wide range of solutions to meet our four key tests and evaluates them

to identify the optimal programme.

Identify 2018 Capacity Identify current capacity using YW asset standard

for digesters (16 day retention time – 5.5%

feed dry solids)104,333 tds

Identify remaining AMP6 investment Identify planned

investment to 2020. This includes Knostrop,

Huddersfield and Dewsbury.+57,186 tds

Planned 2020 Capacity

161,519 tds

Calculate 2017/18 Sludge Production Calculate measured

production of sewage sludge in line with APR

methodology146,600 tds

Identify remaining AMP6 sludge production

changes

Analysing forecast population changes and

changes to sewage treatment processes

that will drive changes to sewage sludge

production+6,139 tds

Planned 2020 Sludge Production

152,739 tds

Identify AMP7 sludge production changes

Analysing forecast population changes and

changes to sewage treatment processes

that will drive changes to sewage sludge

production+24,619 tds

Planned 2025 Sludge Production

177,358 tds

2025 Capacity with no investment

153,127 tds

Identify AMP7 sludge capacity changes Recognises investment

need at Naburn STC that will remove capacity without investment-8,392 tds

Check capacity plan for AMP7 against objectives

Meet 2025 Capacity

Requirementû

Develop set of notional YW/market-tested/resilience solutions to meet tests

No shortfalls over AMP7 û

Resilient to 95% of events û

Efficient capacity

ü

£0m

Figure 7: 4-step test

1.3.1. Forecasting Production

Yorkshire Water’s waste water treatment works are forecast to produce 152,739 tds in

2020/21 rising to 177,358 tds in 2024/5 as a result of population growth and significant

additional treatment requirements driven by the WINEP programme.

The methodology for forecasting this production, produced with our partner ARUP, is

outlined in appendix 1 of this document.

Using the sludge production methodology in appendix 1, the graph below (see Figure 8)

shows how the level of sludge production will continue to increase in AMP7 creating a

further deficit in our internal treatment capacity.

Figure 8: AMP7 Planned Capacity – Monthly tds

The asset base we will have at 2020 is based on our 2018 asset base and forecast

investment between 2018 and 2020. We are building large sludge treatment centres at our

Leeds site Knostrop and at Huddersfield. We also take into consideration the asset

condition, age and performance of all our facilities. We have a range of asset ages and

some of our older assets will need significant refurbishment and renewal in the AMP7

period. One example of this is at Naburn (York). In addition to this we know that some of our

assets will need planned shutdowns, during which, our capacity will drop. The outlook for

treatment capacity over AMP7, has therefore when taking account, the impacts of

Population Growth and WINEP, cumulative shortfall of 46,167 tds across the AMP.

1.4. Investing for New Capacity

We recognise that the historic approach of building new digestion capacity to provide

treatment capacity will not always provide the most efficient solution. Because of this, we

have considered a number of ways of providing treatment capacity in order to present the

most optimal to customers. These options are:

• Build new/additional capacity using existing capital delivery frameworks (mesophilic AD)

• Build new/additional capacity using market tested capital delivery frameworks (mesophilic

AD)

• Create capacity at existing conventional digestion sites utilising advanced anaerobic

digestion (existing frameworks or market tested frameworks)

• Procure outsourced treatment contract for sludge (outsourced capacity) using market

tested frameworks

• Create flexibility in existing capacity with enhanced operations and maintenance

approach or with minor capital investment to remove ‘bottle-necks’

Each scenario uses combinations of the intiatives that Yorkshire Water have used to create

efficient capacity. This is shown in the table below (see Figure 9).

Initiative Approach Description

Refurbish Naburn UCD Cost

Conventional YW The unit cost database (UCD) price for refurbishing our Naburn STC

which will lose capacity without further investment

Decommission Naburn Conventional YW The cost of decommissioning Naburn, should capacity be created

elsewhere

Outsource North Area Sites (5,000 tds)

Market-Tested A market tested price for exporting 5,000 tds of sludge to a

neighbouring water company

Outsource North Area Sites (2,000 tds)

Market-Tested An assumed scaled version of the above market tested initiative

Export Sludge Agreement to WASC

Market-Tested A market tested solution for exporting 14,000 tds of sludge to a

neighbouring water company

Build 5th & 6th Digester at Knostrop STC

Conventional YW A UCD price for building a fifth digester and sixth digester at our

Knostrop STC. AMP6 investment scheme designed to allow efficient expansion.

Build THP at Knostrop STC (Conventional Delivery)

Conventional YW A UCD price for building an advanced digestion THP at our Knostrop

STC. AMP6 investment scheme designed to allow efficient expansion.

Refurbish OOS 5/6th Digesters at Hull STC

Conventional YW A UCD price for building a fifth and sixth digester at our Knostrop STC.

AMP6 investment scheme designed to allow efficient expansion.

DBFO THP build at Hull STC (Basic)

Market-Tested A market tested option for design-build-operate-finance (DBFO) of

THP at Hull STC

DBFO THP build at Hull STC (Extended)

Market-Tested A market tested option for design-build-operate-finance (DBFO) of

THP at Hull STC

Build THP Blackburn Meadows STC

(Conventional Delivery) Conventional YW

A UCD price for installation of THP at Blackburn Meadows STC

DBFO THP build at Blackburn Meadows STC

(Basic) Market-Tested

A market tested option for design-build-operate-finance (DBFO) of THP at Blackburn Meadows STC

DBFO THP build at Blackburn Meadows STC

(Extended) Market-Tested

A market tested option for design-build-operate-finance (DBFO) of THP at Blackburn Meadows STC

Resilience Solutions Conventional YW A package of initiatives included in base maintenance programme that

deliver resilience in planned capacity (see resilience section)

Figure 9: Scenarios to improve capacity

A scenario analysis of these options (see Figure 10) identifies the best scenario for meeting

all four key tests for our capacity programme:

Develop set of notional YW/market-tested/resilience solutions to meet tests

Check each solution scenario against tests

Meet 2025 Capacity

Requirementü

Select optimal

No shortfalls over AMP7 ü

Resilient to 95% of events ü

Efficient capacity

ü

£40m

Figure 10: Key tests for Capacity

The preferred scenario comprises the following initiatives (see Figure 11):

Initiative Delivery Route Site

tds

Capacity

Created

CAPEX

(£m)

Annual

OPEX

Impact

(£m)

Decommission Naburn Conventional YW Naburn - 10.00 - 0.36

Outsource North Area Sites (2,000 tds) Market-Tested North Area 2,000 - 0.65

Build 5th & 6th Digester at Knostrop STC Conventional YW (fully tendered) Knostrop 16,492 24.61 1.43

Refurbish OOS 5/6th Digesters at Hull STC Conventional YW Hull 9,755 11.00 0.43

Resilience Solutions Conventional YW - -

Figure 11: Preferred Scenario

The table shows that there is a proposal for a mixture of conventional and non conventional

options to deliver our most efficient treatment capacity objectives to meet the shortfall

identified in our modelling. The market tested inititaive is based on discussions we have had

with supplier companies and neighbouring water companies. This is discussed in more

detail below.

This programme has been assessed as deliverable based on internal/external scrutiny of

the market tested and YW based prices although contracts have not been signed.

Further procurement exercises have now started to implement the programme of work to

provide bioresources capacity in Yorkshire Water.

1.5. Innovation

Our innovation approach is designed to ensure our assets deliver efficiency and resilience

both now and into the future. We believe innovation has a key role to play in exploring

opportunities and risks that do not currently present themselves but could do before 2045.

By exploring these now in a planned and managed way we can prepare for potential shocks.

Innovation in Bioresources falls into three areas in line with a company-wide innovation

strategy.

• Research and Development Innovation – The aim of Research and Development

(R&D) innovation is to fill gaps in knowledge, services and products which cannot be

provided by the supply chain or by process changes, with the Business taking ownership of

delivery. The programme establishes a small number of significant, high value projects

informing transformational change.

• Cultural Innovation – Cultural Innovation is how creative, collaborative and process

driven colleagues within the business are to make positive changes in how the company

delivers services. It is the day to day process of continuous improvement. It also

demonstrates the maturity and capability of partners, and their aspiration, to suggest or

make those changes.

• Supply Chain Innovation – Once articulated, if a risk or opportunity cannot be

mitigated or realised through process change by colleagues or partners, the Supply Chain

should be stimulated utilising the Procurement process. This in turn is dependent upon the

ability of the business (client and Procurement colleagues) to articulate and specify on which

the supply chain can deliver. The procurement process should be 2-way to allow innovative

solutions to be offered over traditional solutions. Innovation funding is not primarily designed

to trial at-market solutions unless as a last resort if they cannot be evaluated by

conventional means.

1.6. Example of Innovative Approaches at Yorkshire Water in Bioresources

The Circular Economy at Esholt

Transformational Research and Development Innovation has been revolutionised by

creating options for future operating models. An example of this is the Integrated Water,

Waste and Resource System concept. This has been tested with the YorWater Online

Community with an 87% positive response and comments. The concept is being

demonstrated at Esholt Waste Water Treatment Works, Bradford. The vision sets the

agenda for research (commercial, academic and at market technologies) into bringing

redundant operational land back into production. This land will be made available to

attract domestic and industrial customers to locate in proximity to our operations to

access sustainable resilient wholesale products such as water (potable and subpotable)

and heat. Following initial work to realise the value of the redundant operational footprint

at Esholt (see section Innovation Track Record), the concept of circular economy

demonstration has been articulated which draws in our customers to utilise resources we

can recover from our immediate environment. The attention this thought leadership is

attracting suggests this systemic approach is both stretching and unique in its ambition.

For example, heat, power, water (both potable and subpotable), nutrients, cellulose and

raw materials for the chemical industry can all be derived. Attracting business which can

utilise these resources allows YW to deliver existing wholesale products more

sustainably whilst providing new wholesale products, thereby realising customer value. A

housing development is currently in planning. This will be an exemplar development,

designed with water sensitivity at its heart, driving down domestic consumption, water re-

use, sustainable urban drainage, cutting edge metering technologies as well as a

heating circuit. Localised industry will take advantage of the same resources.

In addition, controlled environment agriculture, or vertical farms, will deliver year-round

high value crops without the need for pesticides. There is a clear alignment with the co-

location of data centres in proximity to waste water treatment works providing power and

cooling. Redundant lagoons will provide a form of flood attenuation and raw water

resources. The model is in development and will demonstrate the value proposition,

through the 6 Capitals approach, informing the conditions for roll out in whole or part at

other YW sites. Stakeholder partners are engaged. Bradford Council and the Local

Enterprise Partnership, Leeds City Region are supporting the articulation and

development of the programme. The concept has been described as having European

significance.

1.6.1. Gasification of Sewage Sludge

YW produces 150,000 tonnes dry solids of bioresources a year. By the end of AMP 6, all

this will be treated by anaerobic digestion with the remaining material used as fertiliser in

agriculture. This is an industry standard methodology, safe and reliable. YW uses

600GWhrs of electricity a year with an associated cost of over £50m. AD could get us to

26% self-sufficiency. For ten years YW has researched and developed alternative ways of

liberating more energy from its bioresources. This has culminated in the industrial scale

demonstration of a gasification technology as a pre-commercial technology.

The delivery of commercial and technical models and an asset standard, over 10,000 hours

of operation has demonstrated a carbo negative, commercially advantageous asset that

SAP Plan to Manufacture

We’re implementing an innovative approach to the management of our Bioreosurces

production line. By thinking of our sludge treatment centres more like lean manufacturing

centres than waste treatment sites we believe we can deliver incremental efficiencies on

our operational costs.

Lean manufacturing organisations utilise SAP tools to do this and we’re implementing

the Plan to Manufacture workstream to realise the benefits they see

Its key characteristics are:

• Optimise production across all our sites

• Use real time cost information for each site

• Identify customer demand hotspots

• Manage & report on asset outages

• Monitor flows & demands

• Easily produce reports, plans & reforecasts

The benefits for bioresources are:

• More cost effective

• Optimises capacity

• Real-time decisions

• More effective planning, forecasting & reporting

• Fully integrated

could deliver energy self-sufficiency. The project was significantly supported by DECC

(Energy Entrepreneur’s Fund). YW is currently seeking innovative commercialisation routes

where customer and environmental benefit can be secured for the long term. Our

commercial research suggests that this is a global first, the highly efficient gasification of

sewage sludge, demonstrated at commercial scale.

1.7. Resilience

1.7.1. Gasification of Sewage Sludge

Resilient, reliable and sustainable water and wastewater services are essential for people,

for the economy, and for the environment. Providing resilient bioresources capacity feeds

into the resilience of our wastewater services and how we protect the environment.

Our planned capacity (provided through in-house and market routes) can treat all the sludge

that we forecast to produce in AMP7. A resilient plan, however, needs to go beyond the

planned events and manage the uncertainty of the future.

Our plan for resilient capacity in bioresources works within the wider resilience framework

for Yorkshire Water, details of which can be found elsewhere in the FBP. We also think that

the standard industry broad-brush approach of building a set ‘head-room’ in facilities is not

nuanced enough to demonstrate a resilient capacity. Resilient capacity needs to be able to

deal with the ‘stresses and shocks’ of the future.

The Yorkshire Water approach to providing resilience capacity takes advantage of an

innovative ‘bioresources resilience model’ to understand and appraise uncertainty in

bioresources treatment. The most cost-effective solutions to provide resilient capacity can

be modelled, analysed and optimised.

1.7.2. Modelling Uncertainty

The experience of AMP6 has shown us that a combination of events can severely impct

treatment capacity and efficiency. Yorkshire Water’s bioresources capacity has been

impacted with reliability, flooding and safety issues.

The future is increasingly changing and unpredictable. Acute shocks such as extreme

weather events and chronic stresses such as aging assets need to be modelled.

A combination of historic analysis and future forecasting informs the events that our

bioresources strategy will need to weather, an example of which is shown below (see

Figure 12).

Figure 12: AMP6 YW Treatment Capacity vs Production

We have built a resilience model to examine and analyse the impact of potential events on

YW’s overall ability to provide a treatment service. This resilient model examines potential

impact events (such as acute events and chronic stresses) and allows Yorkshire Water to

consider the variable impact of mitigation against these events.

Our resilience model brings together capacity and potential events to analyse solutions

against our resilience target (95% of all events managed with no surplus sludge):

1. Capacity – Market solutions for emergency/planned capacity, flexibility in capacity

(e.g. optimising digester retention times) and baseline capacity

2. Impact events – External risks (e.g. flooding, farming impacts), known asset risks

(e.g. digester failure) and historic events (e.g. centrifuge downtime

3. Modelling – Monte Carlo analysis of 1,000 iterations to create a probability

distribution of sludge treatment surplus and deficit

Flooding

Asset reliability Asset safety

Solutions – Investment/operational interventions to either increase capacity or reduce

likelihood of impact events.

Bioresources PR19 Resilience Model

Analyse historic events

Identify asset risks

Identify external risks

Agree AMP7 impact events

(impact/duration/probability)

Impact Events

Input AMP7 asset capacity

Identify capacity flexibility

(headroom/bottlenecks)

Identify market options for

capacity

Agree AMP7 flexible capacity

Capacity

Model 1,000 iterations

Review Outputs

Meeting resilience

target?

PR19 Resilience Plan

Y

Identify solutions to reduce risk/

improve capacity and remodel

N

Figure 13: Bioresources PR19 Resilience Model

The graphic above (see Figure 13) shows a snapshot of our resilience model.

Our resilience approach uses solutions in five areas:

1. Resistance (protection to withstand a hazard)

a. We have considered flood protection and cold weather protection where

appropriate

2. Reliability (ability to operate in a range of conditions)

a. We have considered an enhanced maintenance approach and the reduction

in impact events this might deliver

3. Redundancy (designed capacity into a system)

a. We have considered additional capacity provision and the cost of that

provision

b. We have considered the ability of our assets to manage greater throughput

by altering certain operational parameters

4. Response and recovery (enabling fast and effective response to an event)

a. We have considered the facilities that allow us to remove sludge quickly from

systems and import it back easily into the treatment network

5. Reflection (learning from experience)

a. We have built a resilience model that captures the learning from past events

b. We will iterate and evolve our resilience model as our understanding of past

and future events develops (a live tool for planning and optimisation)

The result of our resilience analysis is a prioritised list of risk-based investment, part of our

base programme, that allows us to guarantee our capacity in line with our strategic objective

(we will guarantee treatment capacity with a 95% confidence level.

Our proposed resilience plan is supported by the following investment initiatives:

1. Outsourced north area treatment – providing guaranteed capacity for 2,000 tds of

sludge

2. Investment in Blackburn Meadows liquor treatment to remove a bottle-neck on

digester retention time flexibility

3. Enhanced maintenance approach to Esholt shut down – reducing the down time of

the THP from 3 weeks to 1 week

4. Digester Refurbishment Programme – improving reliability of heating and pumping

systems

5. Enhanced Maintenance Approach – reducing the likelihood of failure and improving

response times to issues

6. Plug and play centrifuge approach – allowing YW to respond quickly to failure on

dewatering assets

7. Outsourced dewatering and thickening – improving reliability and throughput for key

assets

2. Market Testing Engagement

In the main narrative section, we touch on the various initiatives we have implemented to

ensure that our plan is lean and efficient. Market testing is a significant part of our strategy

to move from lower quartile in the industry to an improved position on efficiency. In our

market testing, we have the following objectives;

• Pursue increased trading

• Utilise third parties

• Stimulate and develop the market

• Collaborate to do more

2.1. Pursue increased trading

We are working to pursue and promote sludge trading in order to increase the efficiency of

providing bioresources services and resilience, in line with our treatment service

performance commitment. Yorkshire Water share the view that sludge trading provides

significant opportunities, both this AMP and beyond. We see these opportunities in two key

areas:

• Flexible, no-volume agreements which can be called on reactively

• Fixed, longer term agreements with guaranteed capacity

These arrangements support increased resilience of both Yorkshire Water and the

Bioresources industry by providing a wider range of pre-agreed treatment options to call

upon, either on a regular basis or in response to incidents and outages.

We have already carried out in-depth modelling to understand where to target these savings

through trading, considering the efficiency of treating sludge at each of our works and

transport costs to the relevant Sludge Treatment Facility (STF). This allowed us to identify

those sites around the edges of our boundary where exporting our sludge, or importing other

companies’ sludge, will be economically beneficial (see Figure 14).

Figure 14: Modelled trading across

water company boundaries

We explain in the main narrative

document how Yorkshire Water has

already been working to develop

reactive agreements with nseveral

WaSCs on this basis, and how we

have been looking at the potential

for including fixed, longer term

agreements as part of our PR19

plans as an alternative to building

new capacity.

2.1.1. Flexible, reactive agreements

This AMP we have set up several short-term trade agreements with Severn Trent,

Northumbrian Water, Anglian Water and United Utilities, who as neighbouring WaSCs

provide a more efficient source of regular treatment capacity for some of our periphery sites

and a viable trade opportunity to replace any short-term shortages in capacity. Sludge

quantities to trade are agreed on a weekly basis, depending on available capacity at the

relevant site and demand.

In addition to benefitting the environment and ultimately lowering customers’ bills, these pilot

agreements will give us the opportunity to understand how best to structure operational and

contractual arrangements to maximise the future trading market.

We believe there is significant opportunity for these flexible agreements to be utilised more.

Our experience of sludge trading suggests that a more effective market could be realised

through being more liquid, with more dynamic and easy-to-use information easily available

to all. This would allow trading to become a more reactive service, open to a wider range of

market participants and able to respond to short term changes in capacity, in addition to

facilitating long term arrangements.

We believe this can be achieved through a Nationwide Sludge Trading Hub.

2.1.2. Fixed, long term agreements

We believe long term and fixed trade agreements can deliver efficiencies either by treating

ldge at more conveniently located or more efficient sites, or by making use of existing

capacity as an alternative to building new works.

Our analysis of sludge treatment efficiency identified several sites in the North of our region

where we believecost savings and environmental benefits can be delivered through a long-

term trading arrangement to a more conveniently located treatment site (brown lines going

from many STWs into one Northumbrian Water STF in Figure 14 above).

Whilst we are trialling short term trading arrangements with Northumbrian Water (see

Flexible, reactive agreements), we wanted to engage with a wider audience of potential

suppliers regarding any AMP7 longer term contract. As part of the market testing exercise

described under Utilise third parties, we asked the market how it could best provide

innovative and cost-effective solutions for the collection, treatment and recycling of sewage

sludge from up to 192 of our treatment facilities spread across North Yorkshire and the

Yorkshire East coast.

We also considered, and are continuing to progress, whether trading could be a viable

alternative to refurbishing one of our large 14,000 tds Sludge Treatment Facilities in York.

We have had significant engagement with and interest from the market in trading as a long-

term solution. Please see Market testing the provision of services for more information.

2.2. Utilise third parties

A substantial element of our approach to achieving our targeted efficiency is to work with a

wider range of companies that can help us think differently about how we provide

bioresources services. We recognise we can’t be experts in everything and have been

listening to companies that do hold the expertise in order to design an outcome based PR19

programme. In doing this we’re looking to collaboratively and innovatively deliver efficiency

and improve performance beyond our current approaches; through new technology, greater

specialism and understanding or commercial innovation.

In advance of our PR19 submission we have been carrying out a series of engagement

activities, aimed at stimulating interest in the market and gaining an understanding of how

we can structure our PR19 plan to maximise opportunities for efficiency.

The first phase of this work included going to the market to engage on nine packages of

work which collectively made up over 80% of our bioresources capital programme.

The results of this work have significantly altered how we plan to deliver bioresources

services next AMP and have identified potential savings of around £100 million which have

been incorporated into our plan.

Further information on our market engagement approach can be found under Collaborate

to do more.

2.2.1. Market testing the provision of services

In January 2018 we went out to the market to engage on nine packages of work, selected

based on where the greatest savings were envisaged and the shortest timescales for

realising the benefits. These packages made up over 80% of our bioresources capital

programme and were offered on an outcome basis, providing the market freedom over how

it approached the requirement.

Capital Delivery Efficiency

1. Delivery of our Digester refurbishment programme,

2. Delivery of our Thickener refurbishment programme, and

3. Delivery of our Dewatering refurbishment programme.

Naburn Sludge Treatment works

4. Complete refurbishment of the existing sludge treatment facility at Naburn STF in York

5. Complete refurbishment of the existing sludge treatment facility and extension of the

existing Sewage Treatment Works (STW) at Naburn in York.

‘Off-take’ solutions

6. Provision of an emergency liquid sludge treatment service; this could include providing

facilities to turn this into cake sludge and transporting to a local facility for treatment,

7. Collection, treatment and recycling of sewage sludge from up to 192 treatment facilities

spread across North Yorkshire and the Yorkshire East coast, and

8. Management of excess biogas which is not currently being utilised.

Enhanced treatment provision

9. Provision of solutions to enhance the efficiency of existing mesophilic Anaerobic

Digestion works.

We reached out to over 90 companies which were a mix of large Tier 1 suppliers and

bespoke, more specialised organisations, and received initial feedback from more than 30.

During this first phase we were most interested in understanding:

• Whether the market was interested in the package,

• What solutions they proposed, and

• What terms Yorkshire Water needed to offer for the market to deliver it most

efficiently.

Following review of the initial findings these packages were re-developed in line with market

comments, which included combining some lots, removing others and notably including

operation and maintenance with the refurbishment of assets. There was a notable lack of

appetite for provision of an emergency sludge contract; companies did not see this as an

attractive offering and did not want formal agreements for this service. However, we feel

some resilience against emergency events can be provided through the flexible, reactive

agreements described under

Flexible, reactive agreements.

The updated packages, (see Figure 15), were developed into a pricing specification and

shared with market participants with a request for budget estimate proposals.

Figure 15: Final market-tested packages

Those companies that responded to this pricing specification provided a range of potential

solutions, some of which looked makedly more efficient than our originally costed solution.

Following the results of this research the solutions built into our Bioresources core

programme are notably different and have significantly altered how we plan to deliver

bioresources services next AMP.

Rather than our traditional in-house delivery, we will be taking to the market complete

outsourcing of thickening and dewatering at all transfer sites across our region. We will be

relaxing our asset standards and procuring on an outcome basis, to give the market freedom

of how it delivers this capability over a fifteen-year contract.

We are looking to procure additional sludge treatment capacity, to help us manage an

increasing population and additional sludge forecast as a result of the National Environment

Programme (WINEP). Our own capacity scenario modelling has given us a clear view of

how to create this capacity within our own sites most cost effectively, and we plan to share

the costs of delivering this approach on a £/tDs basis with the market and asking them to

beat it.

Through this approach we will be offering outsourced delivery of at least 15,000tDs sludge

treatment capacity to the market and are remaining technology agnostic, so long as the

proposed solution meets our quality parameters (such as Biosolids Assurance Scheme

compliant and contributing to energy generation). The winning approach can therefore be

based on the most economically beneficial offer.

Initially, feedback on the market’s approach to managing biogas was quite high level and we

have since continued engagement with prospective suppliers, including by highlighting the

challenge and our aspirations in this area at a Biogas Opportunities Stall at our Bioresources

Supplier Day in April 2018 (see Collaborate to do more). We now believe there are

considerable opportunities available around biogas management including through

technologies that are new to us, such as gas-to-grid and gas-to-fuel solutions. Working with

specialised market providers offers us the chance for both creating greater value from our

biogas, supporting our energy generation performance commitment, and contributing to

required emissions abatements. We plan to start by offering to the market outsourced

biogas management at three identified priority sites.

Over the coming months we will continue to develop our plans in this area, including defining

in more detail, through further market engagement, the lots to be offered (see Collaborate

to do more). We will also work to further explore the pros and cons of alternative funding

arrangements, which the market expressed an interest in, and to develop more specialised

internal capabilities to enable market delivery, such as contract management.

This engagement process has highlighted some real opportunities to drive efficiencies into

our bioresources business and has identified potential savings of around £100 million

compared to our originally costed solutions, which have been incorporated into our business

plan.

2.3. Stimulate and develop the market

Whilst working to pursue a range of immediate opportunities around markets, we’ve also

given thought to our role in developing the market and its ability to respond to future

challenges. We want to continue to develop bioresources treatment to be increasingly

efficient; making the most of new and innovative solutions that can deliver benefits to the

economy, society and the environment.

We plan to enable this change by providing support and incentives for the market to develop

in areas that align with our long-term bioresources strategy, and by becoming more agile in

order to react to evolving technologies and approaches.

Examples of this include:

• Sponsoring research into the optimisation of Anaerobic Digestion, to try and increase

gas yields beyond what is currently feasible and enhance pathogen reduction,

• Funding research to enable development of a market in nutrient recovery

• Using data more effectively to incentivise behaviours, for instance factoring in more

granular cost parameters into outcome-based contracts so that suppliers can make

informed decisions into how to manage services.

We’re also looking into how we can build our assets differently so that third parties can

easily demonstrate new technologies without disruption to our operations or additional costly

investment. This will likely include use of hook up points on some of our assets, so that

mobile units can easily be incorporated making us more resilient to failures and able to work

with differing technologies, and Innovation Pads, which will give third party providers a site

to develop and test their technology in a real-world scenario.

2.4. Collaborate to do more

In our efforts to drive efficiency, boost resilience and deliver further innovation within

bioresources treatment, we’re also considering how we can involve others more to make the

most from opportunities in bioresources.

In advance of our PR19 bioresources submission we have been carrying out a series of

engagement activities with the market, to simulate interest in working with Yorkshire Water

and to understand how we can most effectively package our services to make the most from

opportunities in bioresources.

The first phase of this work included market testing over 80% of our bioresources capital

programme, by taking nine outcome-based packages to the market and collaborating to

develop a more efficient PR19 plan of activities (see Market testing the provision of

services).

Following this we hosted our first Bioresources Supplier Day, which provided an opportunity

for us to engage with potential suppliers on our aspirations for the bioresources business

and how we are looking to the market to support us in delivering our company outcomes. A

Incentivising the Nutrient Recovery Market

One area we’re particularly interested in incentivising is that of nutrient recovery. Whilst

not economically beneficial in the short term we believe this is the right thing to explore

in line with our aspiration to protect the environment, and our bioresources objective to

get the most from our resources.

We are working with two emerging technologies which recover nutrients for agricultural

or industrial use, in addition to other resources such as acetic acid. This can be used as

an industrial chemical feedstock and potentially as a cleaning product, which we are

currently trialling.

series of presentations and face to face meetings on the day allowed us to stimulate further

interest from the market and get it thinking about how we can work together differently to

deliver bioresources services. We had over 100 attendees from 60 different companies

attending, ranging from large Tier 1 suppliers to small technology organisations and even

other water companies, to ensure we maximise the opportunity for innovation.

In June we held a follow-on session, our Bioresources Collaboration Day, as requested by

attendees of the first event. This session presented in far greater detail the lots being offered

to the market and the process for bidding and provided a chance to connect a range of

companies to facilitate collaboration and ultimately enable more innovative bids.

Most importantly it provided a final opportunity for the market to advise us on how best to

structure the services offered in our upcoming outcome-based procurement, including

inputting into how the lots were split, the market view on reasonable handover requirements

and what outperformance might look like.

Through collaborating with the market throughout the development of our PR19 plans to

influence the outcomes we’re looking to achieve and the way in which we procure them, we

believe Yorkshire Water will be able to deliver a truly transformation bioresources service

which delivers benefits for customers, the environment and the suppliers involved in working

with us.

Creation of the first “National Test Centre Pads”

Our Innovation team are working to develop Innovation Pads as part of their plans to

create value from redundant pieces of land across our Esholt estate, enabling the

creation of the first “national test centre pads”. By partnering with a commercial entity

we wish to provide access to water and waste water products, throughout the treatment

process, for third parties to develop their technologies from concept through to a

commercially viable product in a real world environment.

Work has commenced to construct up to ten concrete pads (manufactured using final

effluent) for the demonstration of technologies. The pads will be managed by a partner

organisation on a commercial basis and be open to Capital Delivery Partners, the

owners of tech, sponsoring water companies and Universities. The aim is to unblock

the supply chain by delivering confidence in technologies demonstrated in a commercial

environment.

An additional benefit will be the exposure to the new and emerging technologies for

Yorkshire Water, who will in turn be able to have high confidence in the products as

they have been tested in our environment enabling quick adoption and realisation of

benefits.

Planned projects within bioresources continue this collaborative theme. Our push to develop

a Nationwide Trading Hub to enablean agile and reactive sludge trading market is being

developed in collaboration with Open Data Leeds, the Yorkshire community of digital

developers (see Flexible, reactive agreements). Working

alongside a partner third party organisation and with funding from DECC, Yorkshire Water

has successfully demonstrated a commercial and technical model for the destruction of

sewage sludge using gasification. We are currently exploring innovative ways to

commercialise the technology, which does not include the customer paying for the capital

infrastructure but benefitting from the lower cost to treat. And our development of the first

national test centre pads will allow us to support third party providers in developing

technologies in a real-world environment.

Appendix 1 – ARUP Sludge production methodology

Yorkshire Water needs to understand the impact of future population change and environmental drivers on sludge production volumes and quality so that it can plan for it.

Arup has been tasked with developing a methodology to estimate future sludge production figures.

The methodology used in building the regional production model is as follows:

1. The list of all existing WwTWs and the respective treatment processes have been obtained from YWS’s AI system.

The largest sites, which treat the bulk of the sewage and are thus responsible for the largest amount of sludge produced have been verified by Arup to ensure the correct treatment processes have been allocated in the model.

2. The residential population estimates for future population were obtained from the YWS Planning department to understand the growth element of the estimates.

The current population equivalent figures were obtained from AI and used as a basis for quantifying the trade population equivalent by subtracting the residential population

Combined current and future population equivalent estimates were derived using the two data sets and entered in the model. The trade population equivalent was assumed constant from year to year.

3. The environmental programme for AMP5 as is being delivered at present, and the best estimate of the AMP6 programme were obtained from the YWS Environmental Regulation team.

The programme was entered into the model by changing, where deemed appropriate, the treatment process to be able to meet the quality driver, e.g. a phosphorous driver on a small site would see a change in process from

trickling filter to trickling filter with chemical dosing, and thus a change in sludge produced.

4. A sludge yield factor table was used to estimate the sludge yield per population equivalent for each process. In addition, the sludge yield was broken down into its components to ensure that the amounts of primary, secondary and chemical sludge could be estimated and better contribute to understand the impacts on sludge treatment assets.

The sludge yield factors were determined using industry reference values and process calculations.

5. Where applicable, for a limited number of sites, water works sludge being disposed to sewer were also included. The amount of water works sludge was determined as part of the research project on coagulant recovery and were estimated in line with the WRc methodology1.

The amount of water works sludge produced has been assumed to remain constant each year and is treated as a chemical sludge due to the high percentage of coagulants.

6. The product of the population equivalent for one site and the relevant sludge yield for the process installed gives the estimated sludge production for the site. These are then summed together for all sites to give a regional sludge production figure.

The exercise is repeated for each year that is considered, generally the beginning/end of each AMP, and the year of calibration 2016,

In addition, the model distinguishes between growth and quality drivers, to enable cost separation.

Furthermore, the STF where the sludge is treated can be allocated to estimate where this is produced and its impact on downstream assets. This has been done by reviewing the logistics business plan figures for tanker and cake movements, where available, or the closest STF to the site in consideration.

7. The model is calibrated against actual data. The reference year was taken as that for the financial year 2016/2017 as reported as part of the CCC17 submission, which is similar in period to the 2016 population estimate year.

A calibration factor that adjusts all sludge yield factors by the same amount was used to allow both the reported and the one estimated by the model to be similar. The calibration factor was estimated to be 0.89, or in other words the model’s output was reduced by 11% and is applied to all estimates of current and future sludge production.

The main reasons for the need to calibrate the model are:

• The sludge yield factors will depend on the fraction and type of trade effluent, i.e. some traders have very high strength and thus high

1 WRc (1992) Water Treatment Processes and Practices, eds Hall, T. and Hyde, R. A., Swindon, UK.

population equivalent effluent with a relatively low solids load which skews sludge production figures;

• Cold digestion is likely to occur in the sewers reducing the load to the works;

• The accuracy of the reported has is likely to range between 5% and 10%.